Cotton prices having surged 10 per cent in one and a half months to Rs 43,000 a candy (356 kg), exporters who had entered forward supply contracts with Chinese buyers settled those at a loss.
Exporters had entered into contracts in the range of Rs 38,500-41,000 a candy for December and January with buyers mainly from China. But prices have increased in major markets like Gujarat. At this price, exports are not viable as the global prices are down.
According to ginning sector sources, 700,000-800,000 bales have been contracted by the exporters with ginners for December to March. Chinese buyers found they didn’t need that much cotton. This helped exporters get an opportunity to exit. Buyers also gave them some concessions, yet exporters had to bear a little loss and deals were understood to have settled at Rs 41,500 a candy a few days ago.
Of the six-6.5-million bales shipped so far, China’s buying share has come down to 60 per cent. However, exports to other parts of the world are said to be increasing. Due to higher prices, new contracts have stopped for a week.
Dilip Patel, president of All Gujarat Cotton Ginners Association, said, “If the price will not come down, the export may not start in the near future.”
During January, the price had increased Rs 2,000 to Rs 43,100-43,200 a candy. But as the export demand has reduced and the domestic mills; buying has come down, the price has decreased to Rs 42,200-42,300 a candy.
“This year, due to overvaluation, India lost the rhythm to achieve export of surplus cotton and the US and Africa got a big share in the last month. So, India has exported hardly 50 per cent of the target and commitments were cancelled by settlement. We see a tough time for the Indian physical market in the coming weeks and the price will be under pressure,” said Arunbhai Dalal of Arun Kumar & Co, a leading cotton trader based in Ahmedabad.